Brazil's Odebrecht plans $8.1 billion landmark investment in Mexico

Marcelo Odebrecht, CEO of Brazilian construction group Odebrecht, speaks during an interview with Reuters …

MEXICO CITY (Reuters) - Brazilian conglomerate Odebrecht plans to spend $8.1 billion in Mexico in the next five years in what appears to mark the biggest investment pledge yet from a Brazilian firm in Latin America's No. 2 economy.

Odebrecht, one of Latin America's biggest family-owned companies, will invest in petrochemicals, renewable energy, ethanol and sugar production and highway concessions, according to a statement put out by the office of Mexico's president.

Since taking office in December, Pena Nieto has been pushing a reform agenda to boost growth and investment. Lawmakers are currently debating a bill that would open up the state-run energy sector to greater private investment.

Mexico and Brazil, which are regional rivals for attracting investments from the developed world and Asia, have at times had a patchy relationship marked by economic disputes and the failure to clinch a bilateral free trade deal.

Since 1999, Brazilian firms have invested less than $1.2 billion in Mexico, according to data on the Mexican economy ministry's website. That is less than 0.4 percent of the $335.7 billion of foreign direct investment that flowed into Mexico during the last 14-1/2 years, mostly from the United States.

Odebrecht, headquartered in Sao Paulo and Salvador, Brazil, has enjoyed enormous growth in Latin America in recent years.

Still, according to a recent report by rating agency Moody's, mismanagement of the regulatory environment in Brazil have made it harder for infrastructure firms to raise capital.

"Even though the infrastructure issuers Moody's rates in Brazil have solid credit metrics, peers operating in more predictable and stable regulatory environments have higher ratings," said Alexandre Leite, one of the report's authors.

"Government interference and the inconsistency in the application of regulation and procedures have created further uncertainties in three infrastructure segments in particular: toll roads, electric utilities and sanitation," he added.

YEARS OF EXPERIENCE

Odebrecht said the firm had already invested $1.8 billion of the planned amount in Mexico, according to the statement from Pena Nieto's office. It was not clear if any of that amount had been registered in the Mexican economy ministry's data.

With 175,000 employees in 26 countries, the conglomerate -- which includes construction, petrochemical, defense and biofuels holdings -- had $41 billion in revenues in 2012.

That was more than double its revenues in 2008, and slightly more than the annual economic output of Panama.

Earlier this year, Odebrecht said it planned to invest $20 billion globally over the next three years, with a large chunk of that spending earmarked for Peru.

The family that runs the company has more than a century of experience with public works projects, dating back to when Emil Odebrecht emigrated to South America from Germany in the 1850s and began building roads in southern Brazil.

More recently, Odebrecht has profited from good relations with Brazil's ruling Workers' Party, which has overtly sought to create "national champions" among Brazilian companies.

Brazil accounted for about 57 percent of Odebrecht's revenue in 2012, with the rest of Latin America and the Caribbean contributing 28 percent.

(Reporting by Michael O'Boyle, Elinor Comlay and Dave Graham in Mexico City and Brian Winter and Guillermo Parra-Bernal in Sao Paulo; Editing by Simon Gardner and Diane Craft)